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Money Mastery, Part 2A: Saving like a Pro

In Part I of my Money Mastery series, I wrote about how I take inventory of my money. For Part 2, I talk about tips for saving money. After writing up my tips, I realized that the topic of saving money cannot be done in one post. So for Part 2A, I delve into the different savings buckets and cover (very lightly) tax breaks! Part 2B will cover saving money on things you buy, and how to have a better purchasing mindset.


Automated savings deposits, tax-free and tax-deferred accounts
The idea of saving money is either oversimplified or overly complicated. When done right, saving is a strategic way of putting *you* first! When you’re saving, you need to think for the short term (emergency funds) and the long term (retirement). You also should take advantage of tax-free or tax-deferred accounts.

I always meet my saving goals because my savings are automatic. The transfers/deposits usually come out of my paycheck or because I pre-set a debit to pull from my main checking account.

I prioritize saving in these buckets as follows:
    1- Emergency Fund (auto-transfer from paycheck)
         - Enough for 3 to 6 months of rent and necessities (utilities, food, medicine)
         - I actually have money split across one high yield checking account and one investment account that holds stable dividend stocks.
    2- Retirement Funds (auto-transfer from paycheck)
         - I contribute enough to my tax-deferred traditional 401K* to get the company match.
         - I have since started up a Roth 401K* (because contributions can be withdrawn at any time)
         - I max out my Roth IRA (my contributions are post-tax, but earnings are tax-free)
         - I won’t rewrite the internet, here’s a great article from Money Under 30 that explains the nuances in retirement accounts.
    3- Investment Account (1 monthly auto-transfer)
         - Not technically a savings account, but this is a bucket I save into every month. I am not a day trader. I check the dividend calendar weekly and research stocks to buy/sell. I also do notice major news that affect the markets (hello, federal shutdown) and adjust accordingly.
    4- New York 529 Plan (1 monthly auto-transfer)
         - I put in $5K minimum a year because of the tax deductions
         - I pull out the funds when I pay for grad school (yes, I use this account for me!)
         - More info at
    5- Other Tax-Deferred and Tax-Free Accounts (auto-transfers from paycheck)
         - Commuter Plan/Mass Transit Plan*: I put in $121 a month pre-tax to cover my monthly metrocard. You can max it out for 2019 with an election of $265/month. There’s also a pre-tax Commuter Parking Plan with the same contribution limit.
         - Health Savings Account*: I put in the max of $3,500 in pre-tax contributions a year. Mine is linked to an investment account and gains are tax-free as well. Here's a recent Motley Fool article about the new 2019 contribution limits.

*Note: Not all companies offer these accounts (or the associated company match), but most do. Or they offer something similar. Check with your HR department.

The Main Takeaways
Saving money is incredibly necessary and can be highly strategic. Emergency funds and retirement funds are two areas that everyone needs to save for, period. Understandably, not everyone has the luxury of putting away so much money to max out the accounts I mentioned above. However, everyone can utilize accounts where there are tax-deferred or pre-tax contributions (even outside of my list above). The less you're taxed, the more you can save. Plus, a little bit goes a long way. Don't think for a second that saving $5 isn't good enough. Starting to save is truly the first step.

Plus, you and your career are going places. With every promotion or salary bump, remember to readjust your savings proportionally, and right away. That will curb lifestyle inflation and keep your savings on track.

And regardless of the situation, automate those transfers!!! You honestly will not miss that money if it was automatically routed to your various savings accounts. When you receive a windfall of money (ie: bonus pay), decide what you can live without and put it straight into one of the buckets/accounts I mentioned above.

Remember, you are paying yourself first when you save. You owe it to yourself, and your future self, to build a foundation of wealth and financial freedom.
Comment below with the accounts or buckets you save into! Part 2B will be about ways to save on items you purchase already and changing the purchasing mindset to a saving mindset.


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